Australian Stock Market Report – Afternoon 8/21/2012

AFTERNOON REPORT
(4.30pm AEST)

Hopes the European Central Bank will provide more economic stimulus saw local stocks rise today, with the ASX200 breaking through the 4400 point mark briefly, for the first time since May. By close, the ASX 200 (XJO) was up 19.1pts or 0.4pct to 4383.4 while the All Ordinaries Index index (XJO) firmed by 18.9pts or 0.4pct to 4410.8.

Financial stocks were generally firmer, with the exception of Westpac (WBC) which fell by 0.4pct to $24.87. The Commonwealth Bank (CBA) which fell yesterday as it traded without rights to its dividend, today closed steady at $55.80. The National Australia Bank (NAB) was up 1.9pct to $25.37 while the ANZ (ANZ) finished at $24.95, a rise of 0.7pct.

Index leader BHP Billiton (BHP) rose by 0.7pct to $33.27, ahead of the release of its first half results tomorrow.

Telstra (TLS) today announced it plans to close two call centres as customers move to the internet for self-serve options. The closure of the call centres in Lismore, NSW and Townsville, Queensland, will see 422 jobs lost. A further 180 jobs will be cut in Melbourne and Sydney as call centre functions are consolidated. Telstra said affected staff would be able to apply for roles in other parts of the company. TLS shares today rose 1.4pct to $3.75.

Among the companies reporting today; international medical diagnostics company Sonic Healthcare Limited (SHL) reported a record profit for the 2011/12 Financial Year. Statutory net profit after tax rose by 7.3pct to $316M. When volatility in the currency markets is stripped out, Sonic´s profit came in at $323.3M for the 12 months to June 30, 2012. Revenue was also strong, up 8pct on the year or 10.5pct on a constant currency basis. Sonic´s earnings benefited from strong organic revenue growth, cost cutting measures and better returns on invested capital. CEO Dr Colin Goldschmidt said Sonic had won market share from its rivals and the result would have been even higher if it weren´t for the strong Australian dollar. Sonic has forecast earnings growth between 5-10pct for the 2012/13 Financial Year, on a constant currency basis; ie- applying 2012 FX rates, and also expects expenses to fall by the same amount. Shareholders will receive a 35c per share dividend, franked at 45%, to be paid on the 9th October. Total shareholder payments for the year came in at 59c per share, slightly lower than forecasts of 59.5c. SHL shares today fell 2.7pct to $12.82, with investors concerned about the fall in revenue at its US operations.

Elsewhere, Arrium Limited (ARI), formerly OneSteel Limited, reported its FY12 results, with underlying NPAT down 17pct to $195 million, just above the unaudited numbers ARI released back in July, of $191 million. Arrium's profit fell 75pct to $58 million. Over the last six months the company has been rebuilding/reinventing itself into a mining producer and moving away from being a distributor and recycler of ore as the business was struggling to make a profit in a tough market. The cost of the company's restructure and large write-downs to its distribution business hurt this year's numbers. The turnaround story is on track and Arrium's mining division is expected to deliver greater port capacity and higher sales by Dec 2012. ARI's local steel division is still being impacted by weak demand and the higher Australian dollar, but the firm is controlling its costs. ARI shares today rose an impressive 11.7pct to $0.905.

Global packaging business Amcor (AMC) announced a $634.9 million profit for the year to June 2012. This was largely in-line with market expectations. AMC is the world´s largest supplier of flexible packaging products; it operates in 30 nations and runs 89 plants within the unit. Around half of its sales were made in its Flexibles Division (which includes packaging for fresh foods such as meat, bread & dairy). Significant items which dragged down Net Profit (NPAT) included a $90.3m class action. During the year, AMC completed a $150m share buy-back. In March 2012, it announced the acquisition of Aperio Group (one of the leading producers of flexibles in Asia-Pacific). AMC declared an unfranked final dividend of $0.19 a share; taking the annual dividend to $0.37. Its shares have fallen in reaction to the profit result; however are up 6.6% since January and continue to improve for the fourth straight year. Looking ahead, AMC expects a ´solid´ rise in earnings, with volumes to remain steady in developed counties. AMC shares today fell 0.8pct to $7.66.

In the energy space, Oilsearch posted a net profit of US$107.5 million for the six months to June 30, down six per cent from $114.5 million in the previous corresponding period. Higher exploration costs were the main reason for the drop in profit, with production down slightly from the previous first half, but sales revenue higher. Oil Search recently suspended loading operations at its Kumul Marine Terminal in Papua New Guinea, after a minor oil spill. OSH shares today closed at $7.16 down by 0.4pct.

The Reserve Bank today released minutes of its Board meeting held on August 7. The minutes made it clear that the Reserve Bank is currently happy with interest rate settings. Inflation remains consistent with the 2-3pct target, economic growth is close to trend and financial conditions have eased following recent rate cuts. In short, the Reserve Bank won't be cutting rates any time soon unless the global economy worsens.

The Australian dollar received a boost on the release of the minutes, and at 4.30pm AEST was buying US104.9c, €84.79c and £0.668.

On the market overall, a total of 1.99 billion shares were traded, worth $4.66 billion. 511 were up, 440 were down and 335 were unchanged,

At 4.30pm AEST, the SFE 200 Futures was at 4372, up 24pts.

The Dow Jones Futures index was at 13233pts, up 4pts.

Ahead tonight, the minutes from the Federal Reserve Open Market Committee's meeting are released.

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